Market regulator SEBI announced new guidelines on Monday designed to enhance transparency regarding related party transactions (RPTs) for listed companies. The requirements mandate that companies provide detailed explanations to their audit committees and shareholders to secure approval for such transactions.
Under the new framework, companies must clarify why a transaction benefits the listed entity, submit any valuations or external reports on which they may have relied, and voluntarily disclose the percentage of the counterpart’s annual turnover represented by the transaction. Additionally, firms are expected to include any pertinent details that the audit committee should consider during the approval process.
When seeking shareholder approval, companies must summarize the information provided to the audit committee, justify the benefits of the transaction to the company, disclose any loans, advances, or investments involved, and ensure that any valuation or external report is accessible to shareholders via their registered email, as specified in SEBI’s circular.
The requirements take effect immediately and include relaxed disclosure norms for smaller RPTs, which are defined as transactions not exceeding 1% of the company’s annual consolidated turnover or ₹10 crore, whichever is lower, either individually or in combination with previous transactions in a financial year. These smaller transactions will be exempt from the detailed disclosure requirements.
This regulatory change follows a decision by SEBI’s board in September to simplify the minimum information companies must provide to both the audit committee and shareholders for RPT approval.
Published on October 14, 2025.
